Forced Arbitration Agreements – What You Don’t Know Can Hurt You

You may not realize it, but every time you sign up for a credit card, a cable company or a cell phone service, you are also signing a contract that will severely limit your rights in the event of a dispute with one of those providers. Most people don’t know that what’s buried in the fine print of a consumer contract is an “agreement” that in the event the company does something wrong and you are harmed, you can’t sue them; you can only resolve that conflict by means of arbitration. But not an arbitration where both parties agree to submit the matter to a neutral third party – you are agreeing to submit the dispute to a jurisdiction and to an arbitrator of their choosing. Which means you could potentially have to take your dispute to Texas or Idaho or Minnesota, or wherever else the company decides it wants these things handled. And they’ll pick the person who will decide who’s right and who’s wrong. Not exactly a level playing field.

Are most people going to do this for a disagreement over $100 or $1,000? Probably not. But what these forced arbitration agreements also do is prevent class-action lawsuits – suits that are filed on behalf of a group of people who are in the same boat. Class-action suits were designed as a consumer remedy that allows thousands of people to hold corporations accountable when they have all been harmed by the same wrongful conduct.

The Federal Consumer Financial Protection Bureau, created by Senator Elizabeth Warren, has undertaken a study and issued a report that shows that – guess what? – arbitration is good for businesses but not good for consumers. And contrary to the claims by businesses that limiting lawsuits allows them to pass those savings along to consumers in the form of reduced fees and improved services – guess what again? – it doesn’t.

The courts are one of the few places where an individual still has any chance to challenge a corporation on anything close to an equal footing. Consumers should not be forced to surrender their 7th Amendment right to a jury trial just because they want a cell phone. Perhaps even more troubling is the fact that these mandatory arbitration agreements can also be found in higher stakes and higher stress situations like those involving the elderly going into nursing homes.

We wouldn’t let the Yankees hand-pick umpires for games against the Red Sox. In the same way, consumers should not let companies have the final say in who decides if they should be held accountable for their own wrongdoing.

The lawyers at Keches Law Group are committed to preserving the rights of consumers to pursue their remedies in a court of law, and have vigorously opposed these forced arbitration agreements at the state and federal level.